Analyze Organizational Financial DataAnalyze Organizational Financial Data

Feb 15, 2024

Analyze Organizational Financial Data

You are an administrator at Arizona Health Services (AHS), a large hospital system. You have been asked to assist in evaluating the financial feasibility of purchasing Jiranna Healthcare, a managed care organization in the San Jose area. For this part of the Performance Task, you will conduct a 5-year analysis of Jiranna Healthcare’s operational and financial data in order to determine whether or not it is an attractive acquisition. Refer to “Jiranna Finances” for financial statements to analyze.

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Prepare a 2- to 3-page financial analysis. The focus must be on the content and the depth of your analysis. Unless otherwise indicated, a 5-year trend analysis—including the most recent year of available data—is expected.

Complete your analysis as follows:

  • Calculate the 5-year net sales, operating expenses, operating income, and net income of Jiranna Healthcare. Once calculations are complete, interpret the resulting data and explain the significance of the trend results.
  • Calculate the 5-year total profit margin, asset turnover, return on assets, and return on net worth. Once calculations are complete, interpret the resulting data and determine the company’s profitability.
  • Calculate the 5-year current ratio, day’s cash on hand, and working capital. Once calculations are complete, interpret the resulting data and assess the company’s liquidity.
  • Calculate the 5-year debt ratio and times interest earned ratio. Once calculations are complete, interpret the resulting data and explain the company’s long term solvency.
  • Complete a DuPont analysis for each of the five most recent years. Once calculations are complete, interpret the resulting data and determine the company’s individual DuPont characteristics (e.g., total margin, total asset turnover & equity multiplier) and trends across the analysis period.
  • Ultimately a decision has to be made. Would you recommend purchasing Jiranna Healthcare? Why?

 

 

Balance Sheet

Jiranna Healthcare Balance Sheet December 31, 2013 (in thousands)
2009 2010 2011 2012 2013
Current assets $ 280 $ 124 $ 136 $ 295 $ 355
Cash 30 45 50 75 88
Receivables, net 1,340 1,536 1,700 1,896 2,400
Inventory 140 175 250 276 266
Prepaid expenses 40 32 40 53 78
Total Current Assets 1,830 1,912 2,176 2,595 3,187
Long-term investments 600 1,010 1,200 1,300 1,510
Plant and equipment 6,580 6,780 6,900 7,200 7,500
Less accumulated depreciation -1,660 -1750 -1,800 -1,950 -2,350
Plants and equipment, net 4,920 5,030 5,100 5,250 5,150
Total Assets $ 7,350 $ 7,952 $ 8,476 $ 9,145 $ 9,847
Current liabilities
Accounts payable 370 302 356 370 375
Accrued expenses payable 220 208 212 210 215
Deferred revenues 60 77 87 87 94
Total current liabilities 650 587 655 667 684
Long-term liabilities 2,400 3,000 3,300 3,500 3,750
Total Liabilities 3,050 3,587 3,955 4,167 4,434
Net assets
Unrestricted 3,000 3,285 3,221 3,678 4,113
Temporarily restricted 700 700 700 700 700
Permanently restricted 600 600 600 600 600
Total Net Assets 4,300 4,585 4,521 4,978 5,413
Total Liabilities and Net Assets 7,350 8,172 8,476 9,145 9,847

Income Statement

Jiranna Healthcare Income Statement December 31, 2013 (in thousands)
2009 2010 2011 2012 2013
Gross patient services revenues (non-GAAP) 8,870 9,490 10,400 11,200 12,050
Less deductions from revenues (non-GAAP) (780) (890) (1,000) (1,500) (1,600)
Net patient service revenues 8,090 8,600 9,400 9,700 10,450
Other operating revenues 519 633 679 717 980
Total operating revenues 8,609 9,233 10,079 10,417 11,430
Operating expenses
Salaries and wages 5,497 5,678 5,890 6,170 6,800
Supplies 823 850 855 890 905
Utilities 558 576 590 595 620
Insurance 44 46 49 54 70
Depreciation 168 173 175 178 188
Interest 142 146 154 179 198
Bad debts 363 375 400 455 500
Other operating expenses 987 1,299 1,560 1,300 1,350
Total operating expenses 8,582 9,143 9,673 9,821 10,631
Operating income 27 90 406 596 799
Nonoperating income 154 195 245 220 290
Excess of revenue over expenses $ 181 $ 285 $ 651 $ 816 $ 1,089
Change in net assets
Unrestricted $ 181 $ 285 $ 651 $ 816 $ 1,089
Temporarily restricted
Permanently restricted
Total change in net assets 181 285 651 816 1,089

Cash Flows

Jiranna Healthcare Cash Flows, 2013 (in thousands)
Cash Flows from Operating Activities
Cash received from patient and third-party payers $ 10,671
Cash received from operating revenue sources 800
Cash received from nonoperating revenue sources 270
Cash payments to employees (5,600)
Cash payments to suppliers of goods and services (4,800)
Net cash flow from operating activities $ 1,341
Cash flows from Investing Activities
Cash payments for purchase of plant assets (1,200)
Cash payments for purchase of long-term investments (670)
Proceeds from sales of plant assets 80
Proceeds from sale of long-term investments 60
Net cash flow from investing activities (1,730)
Cash flows from Financing Activities
Proceeds from issuance of 6% bonds payable 4,000
Principal payments on long-term debt (300)
Cash payments to retire 7% bonds payable (3,200)
Net cash flow from financing activities 500
Net increase/(decrease) in cash $ 111

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